The downside of market arbitrage
E-commerce opens online businesses to new sales methods that will help them reach untapped markets.
Unlike brick-and-mortar stores that only rely on customers for their revenue, online stores generate sales in multiple ways, be it on their website or in the marketplaces.
Some internet sellers source their products from product label providers, others produce their own, while there are also those who ship directly.
Of all the selling practices available these days, arbitrage exhibits a double standard that the big markets don’t appreciate.
Call it a one way street where only the vendor benefits while consumers and other retailers are at a disadvantage.
Although historically identified with brick-and-mortar stores, where arbitrageurs would buy items for a song and then sell them for a higher price, retail arbitrage has inevitably evolved into an online scheme from which many companies profit.
The adulterated arbitration scheme
Forcing consumers to spend more than necessary is totally fine, as they have the option not to.
What poses a problem with online retail arbitrage, specifically in markets, is the deliberate failure to fulfill orders.
In other words, a market arbitrageur makes the retailer from whom he bought a very cheap item fulfill his customer’s order. If the item is found to be defective and the customer wishes to return it, the customer will contact its original source and not the arbitration seller.
the bad effects
Marketplace sellers using arbitrage are starting to lose sales specifically on the eBay platform.
Gone are the days when you could make easy money by copying listings from another website like Amazon and republishing them on eBay at higher prices.
It costs nothing except a software to obtain products from other markets, also it does not imply responsibilities.
However, eBay will not tolerate such a scheme, thus preventing sellers who practice it from making further sales.
That’s according to SaleFreaks, an Israeli company that offers an all-in-one online retail arbitration tool from Amazon to eBay, which has joined forces with its customers to bring a legal case against the renowned marketplace.
They said their customer’s eBay listings have not appeared in Best Match search results, resulting in lower sales.
The company’s CEO, Adi Reiss, accused eBay of manipulating the Best Match results, stating on Facebook:
“eBay admitted that they, in fact, manipulated the ‘best match’ search results against ‘dropshippers’ in relation to sellers not ‘dropshipping’ from online sites to ‘preserve the integrity of eBay’ and ‘protect customers’. buyers”.
It may seem like eBay doesn’t support dropshippers, but their website says otherwise. In fact, they explicitly define drop shipping as:
“Usually used by sellers who buy wholesale stock from their supplier. After the seller receives an order from eBay, they work with the supplier to ship the item directly to the buyer. If you use drop shipping, it’s still responsible for the safe delivery of the item within the timeframe you indicated on your listing and the buyer’s overall satisfaction with their purchase.”
There you have it, straight from the horse’s mouth.
Now it’s clear that direct shipping from other websites is allowed, but any other method, especially one without customer responsibility, should be thought twice.